This paper examines the impact of the COVID-19 crisis on the reallocation of economic activity across firms, and whether this reallocation depends on the competition environment. The paper uses the World Bank’s Enterprise Surveys COVID-19 Follow-up Surveys for about 8,000 firms in 23 emerging and developing countries in Europe and Central Asia, matched with 2019 Enterprise Surveys data. It finds that during the COVID-19 crisis, economic activity was reallocated toward firms with higher pre-crisis labor productivity. Countries with a strong competition environment experienced more reallocation from less productive to more productive firms than countries with a weak competition environment. The evidence also suggests that reallocation from low- to high-productivity firms during the COVID-19 crisis was stronger compared with pre-crisis times. Finally, the analysis shows that government support measures implemented in response to the crisis may have adverse effects on competition and productivity growth since support went to less productive and larger firms, regardless of their pre-crisis innovation.
Details
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Author
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Document Date
2021/11/16
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Document Type
Policy Research Working Paper
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Report Number
WPS9851
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2021/11/16
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Disclosure Status
Disclosed
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Doc Name
Competition and Firm Recovery Post-COVID-19
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Citation
Bruhn,Miriam Demirguc-Kunt,Asli Singer,Dorothe
Competition and Firm Recovery Post-COVID-19 (English). Policy Research working paper,no. WPS 9851,COVID-19 (Coronavirus) Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/132651637073660006/Competition-and-Firm-Recovery-Post-COVID-19